With the rising cost of living and the growing necessity of having qualifications to climb up the ranks in most companies, many parents and individuals realise the importance of having a degree.
However, many simply can’t afford the exorbitant university tuition fees unless they take up loans.
If you’re interested in finding out how to pay for your child’s university education without him/her taking a loan, continue reading to determine how you can conduct education planning in Singapore.
What is Education Planning?
Education planning is to proactively identify, develop, and implement approaches to efficiently attain the educational needs and goals for your child.
This includes ensuring that you have enough funds for yourself while making plans for your child’s education.
Parenting involves several obligations, from caring for the child’s physical needs, imparting values to mapping their future. All of these duties may stack up as you juggle with your daily life.
Besides, there are other various fiscal responsibilities that you need to handle, such as your investment and retirement goals.
Importance of Planning For Your Child’s Education in Singapore
Your child’s university education is one area you cannot neglect at any cost. The world today is ever-changing, and new career pathways are constantly surfacing with the rise in technology.
All these changes make education planning vital to promote career goals and options based on your child’s interests and skills.
As parents, you become well-equipped for managing their future when you have a plan. You empower them to take advantage of economic changes and the job markets in the long run.
It becomes all the more challenging when education in Singapore is everything but cheap. And that is one valid reason why parents need to save ahead of time.
A four-year undergraduate programme in public universities typically costs around $40,000 for Singapore citizens. A specialised degree can go way higher than that.
It is almost 3 times higher than it was a decade ago. And it is deemed to get much higher in another 10 years due to inflation.
This cost is besides other expenses, such as accommodation, food, commute, and allowance. The fees will presumably get higher with rising demand.
We are unknown about what life has in store for us. We must ensure that our children get financial support to continue their education. Start with any amount you can. As long as you and your spouse maintain discipline and conviction, the smallest amounts will help you in the long run.
After all, you would not want your child to bear the burden of debt before they even begin their career. Hence, it is never too early to start planning for your child’s education. If you start saving early, you would be ahead at reaching your target funds due to compounding effects.
Despite the rising education costs, you must urge your child to focus on their studies and not worry about their finances. Make them understand that you got their back, and you do.
Indeed, saving for such exorbitant fees can be challenging. But, it’s very much doable as long as you do periodic reviews of your savings to be on track. Adjust saving methods and make the required changes to your plans whenever needed.
How to Begin Planning For Your Child’s Education?
Planning for your child’s education may be arduous. But, a little forethought and a plan of action can make your job less cumbersome. As much as planning is essential, you must also be aware of other crucial factors before saving.
The ever certain and constant factor in every financial goal is inflation. The average cost of a four-year degree is $40,000 in today’s value. We are sure that it will get much higher with inflation.
Even if we reckon a nominal 2% inflation rate each year, it would still spike almost 50% higher in 20 years. This figure would shoot much higher in the case of sending your child overseas.
Thus, it is pivotal to consider the inflation factor while calculating your child’s university education. If you cannot figure out how much you would need, you could discuss it with a reliable advisor. They can help you work out the amount and begin a firm financial plan.
Education planning is a long term goal. You need to know your potential to save for that span without straining your finances. Besides, there are other financial goals you need to focus on simultaneously. Analyse the impact of inflation on your financial needs at least for 20 years down the line.
Secondly, assess your risk appetite so that you can start investing your savings to earn higher returns. After taking off with your financial plan, take fewer risks to fulfil your end goal as your timeline nears.
A traditional yet helpful way to save is by watching your living expenses and planning future expenses. Discuss with your spouse how you can cut down on non-essentials and lead a more sufficient and less wasteful lifestyle.
By saying this, it doesn’t mean that you need to bend over backwards. Just cut down on expenses that you can live without. For instance, your finances will look better if you have lesser expensive dinner dates or hobbies like golfing.
Look for ways to fulfil your desires more sustainably and not overspend unnecessarily.
Preparing for The Worst
As parents, you would want your child to study at one of the best universities. However, always have a plan B handy because the harsh truth is, there’s no guarantee. The competition is massive while the seats are limited, especially with some high-demand courses.
Your child may also form a passion for a career path requiring a programme that may not be available in local universities.
In such a scenario, you might need to send them to an overseas university. The costs of studying abroad will be considerably higher. You will have to consider living costs such as student accommodation, commute, food, tuition, flights, and allowance on top of any miscellaneous fees.
Things You Can Do To Get Started With Education Planning
Even if the predicted savings do not reach the target amount, don’t fret. Besides being prudent with your money, you can pace up to your target by counting on making smart investments.
A way to increase savings is by opening a DBS Multiplier account. It is a deposit account that gives higher interest rates on crediting your account and making transactions.
The kinds of transactions are credit card spend, home loan instalment, insurance, and investments. Its USP is it doesn’t have any minimum credit card spend or salary credit limit.
A wise option for parents is to consider investing through an education endowment plan. It protects your savings while letting you earn higher interest than savings accounts. Savings plans like these will get you to save money on a regular basis while providing the policyholder with insurance coverage.
The savings you put every month will accrue to a lump sum amount that you can claim in the maturity payout. They come to the rescue for various financial goals, including your child’s education fund. You can plan a maturity age in this savings plan to align with your child’s educational milestones.
There are several types of endowment / savings plans. Some even allow you to pay premiums for the first ten years. On maturity, you will receive 100% of the total premiums plus fixed cash benefits.
Furthermore, you can opt for additional insurance coverage through riders to protect you and your child’s education. This feature is helpful in case you face any unsought event.
Make sure that the maturity payout is sufficient to pay for the cost of university.
There are numerous other investment products in the market to help grow your money. You could be investing between unit trusts, bonds, equities, or Exchange Traded Funds (ETF), depending on your investment profile.
However, it’d be wise to do your bit of research first as investments carry risks. If you’re someone who’s not that financially savvy, getting an investment-based investment-linked policy might be a good alternative for you.
Portfolio management comes into play here. It defines the time when you would need your savings to aid your child’s tertiary education.
Consider signing up for a savings plan with a standard maturity period of 15-20 years.
Plan the maturity period of your plan in such a way that you get the returns at the start of your child’s tertiary education.
Once you have foresight when you need the money, make sure your plan protects your money before the maturity period draws near. You cannot take the risk of the market conditions draining out most of your portfolio before your child needs the money.
At the same time, be ready to support your child as they develop their paths along the years. You may need the money earlier than anticipated. So, make sure your plan is flexible to suit your needs invariably.
Apart from saving on your own, there are other ways that can aid to fund your child’s university education.
- Check with the institution of your child if they have the Tuition Fee Loan Scheme. This loan is free of interest during the course of study.
- The CPF Education Scheme lets you borrow money for your child’s tertiary education at a local university. However, it is ruled to a withdrawal cap, and your child will have to repay with interest.
- Include looking for loans from banks that give more competitive study loans in your research.
- For eligible students, some universities and institutions offer subsidies, grants, and scholarships.
- Your child could also avail the Tuition Grant from Singapore’s Ministry of Education. It subsidises up to 80% of tuition fees in local universities and polytechnics.
- Edusave scholarships and awards in primary and secondary schools can contribute to saving for your child’s university education.
We are confident these pointers would help you map your child’s and your future out as parents. It’s about you as much as it is about your child. You cannot undermine the fact that raising a child will take a hit on your finances.
At the end of the day, the immediate needs of your family come first. However, you can take the necessary steps to make plans that ease any challenges that come ahead.
The earlier you plan for your child, the sooner you will prepare for your retirement. If you need help to plan for your future, always talk to a financial advisor to get a comprehensive view of financial planning.